NEW YORK Analysts and
producers are reasonably optimistic about copper demand this
year as a number of end-markets, notably U.S. construction,
Even a modest recovery in
construction will undoubtedly boost copper markets, analysts
and producer sources said.
"Im expecting a
construction recovery in 2013. Not a rip-roaring one by any
means, but a moderate, bubbling recovery," Christopher
Ecclestone, mining strategist at Hallgarten & Co. LLC, told
AMM. "It cant stay in the dumpster forever.
Its been five years."
A second analyst agreed.
"Construction spending in the U.S. improved ... in 2012 after
five years of consecutive declines. Its just a matter of
how much it will increase, but the link to construction
spending (will boost copper)," he said.
Citigroup Inc. estimated in a
Jan. 16 research report that spending on U.S. construction
projects in the first 11 months of 2012 increased 9.2 percent
from the $778 billion spent in 2011, and expects that trend
will continue this year.
Automotive and power companies
also are making investments this year, more positive indicators
that copper should have a decent 2013, Freeport-McMoRan Copper
& Gold Inc. president and chief executive officer Richard
Adkerson said during an earnings conference call.
"Were seeing some degrees
of improvements. Construction in the U.S. is growing.
Automotive has been strong and the outlook is for continued
strength. There are some ... power companies investing in the
grid. Theres a short-term effect from the damage caused
by Hurricane Sandy," Adkerson said. "Overall in the U.S., our
customers are talking about an environment of moderate
Even modest growth will help
copper markets as there is very little inventory in the supply
chain, sources said.
"It wont take a lot of
recovery to tighten the market up. Everyones destocked in
the West," Ecclestone said.
Adkerson agreed that inventories
remain relatively low.
Global copper inventories in
London Metal Exchange-listed warehouses total nearly 345,000
Most agree that copper supply is
reasonably tight. Morgan Stanley analysts expect "upside demand
surprises amid continued supply constraints."
"I think copper is the tightest
of the metals," said John Tumazos of Very Independent Research
LLC. "But I dont think its a complete statement."
While some producers are delaying projects, others, such as Rio
Tinto Plc and Freeport, are expanding copper production, which
could put excess copper on the marketplace, he said.
Freeport expects to increase
daily copper ore output at its Deep Ore Zone Grasberg Mine in
Indonesia to 80,000 tonnes per day by the end of this year,
which will help bring 2013 copper sales to 1.1 billion pounds
amm.com, Jan. 23).
"Markets are fairly tight
currently, but could swing into a surplus as additional
capacity comes online. Some of that is from Freeport
themselves," the second analyst said. The refined copper market
balance in the first 10 months of 2012 indicated a production
deficit of 557,000 tonnes, according to the latest data from
the International Copper Study Group, compared with a deficit
of 146,000 tonnes in the same period in 2011.
Copper consumers have recently
voiced concern over the proposed launch of JPMorgan Chase &
Co.s physically backed copper exchange-traded fund (ETF)
and its potential to squeeze supply (
amm.com, Jan. 11).
Analysts anticipate copper
prices will stay steady for the moment.
Hallgarten is forecasting
average 2013 copper prices between $3.50 and $3.80 per pound
($7,716 to $8,378 per tonne); Citigroup has forecast an average
of $3.67 per pound ($8,091 per tonne); and Morgan Stanley
anticipates a $3.88-per-pound ($8,554-per-tonne) average.
"Copper is not currently at its
all-time highs that we experienced in 2011, but considering the
global economic situation theres no way to say anything
other than the current price is very strong," Adkerson
LME three-month copper closed
Thursdays official session at $8,076 per tonne ($3.66 per